Tuesday, March 23, 2010

Potential entrants

Potential entrants
The new entrants face barriers to entry.They need to overcome them to complete successfully.The barriers can be :
  1. Economic of scale :They require high investment to again cost advantage.They can be in production or marketing.
  2. Capital requirement :Specialized technology requires high capital cost.So does scale of production and distribution.Globalization has advantage in this respect.
  3. Production differentiation :It can be terms of physical factors,service,promotion,channel or image.Customers perceive the product superior in value compered to competing products.
  4. Access to distribution channels :Blocked access to established channels become a barrier to entry.Guaranteed distribution also blocked new entrants.
  5. Customers loyalty :High customer loyalty to brands service as a barrier to entry.
  6. Retaliation :Expected retaliation by exiting firms can be costly for new entrances.
  7. Experience :Experience provides established firms benefits in terms of cost of loyalty.It makes entry difficult for a new entrant.
  8. Government actions :Patent and trademark protection and preferential treatments by government serve as a barrier to entry of new entrants .So licensing requirements.

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